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You can still get an investment property loan with 10% down. You have to have excellent credit, income and assets (~6 months PITI payments) of course but it is possible.
The rates and PMI are of course a bit high, the payment situation gets much better with 20-25% down.
Yeah I was hoping I could potentially find something with 5% down but I know it's not super likely. I do have A+ credit though. I was quoted 10% down, 7% interest rate, and potentially 1 pt. closing for a loan.. Does that sound good?
Yeah I was hoping I could potentially find something with 5% down but I know it's not super likely. I do have A+ credit though. I was quoted 10% down, 7% interest rate, and potentially 1 pt. closing for a loan.. Does that sound good?
That really isnt anywhere near enough data to tell. Really, you need to know location, debts, income, assets, exact credit score, loan amount, prior rental experience, work history, mortgage history, number of properties owned, loan terms (fixed or ARM, 15 or 30 year) and I am sure I missed a few items.
Down payment and credit are the biggest factors that go into determining an interest rate, but they are not the only ones. Its not outrageously high or amazingly low... but those factors will determine what rate/terms you will be able to get.
It depends where you are but the rate quoted seems just a bit high. If you have good credit and 10% down, you could most likely qualify for a rate in the 6's or low 7's with zero points, but depends where you are for the rate. I can get that here in Florida for that loan. the other major thing that matters is if you want to go stated or full doc. You are only getting 90% with full doc. Good luck with the purchase
Today's mortgage market is tough, no doubt. Conventional lenders
have really tightened up on all fronts. Some of the most recent
changes include reduction of maximum financed properties held to 4
from 10 and 6 months of seasoning time for cash out. Larger down
payments are typically required as well since PMI is no longer
available on investment properties.
So this leaves investors with several options.
1. use commercial/bank loans which dont get sold off into the
secondary market. no limit on the # of properties owned and financed
and no limitation on seasoning. Max ltvs are usually 70-80% but
really depend on how well the property cash flows. These lenders
look at the debt service ratio of the subject property. Since these
are usually amortized over 20yrs with a 3-5yr balloon the loan
amounts might be lower than expected to satisfy the lenders debt
service requirement. Rates and cost are pretty decent on these types
of deals.
2. Purchasing with less than 20% down can be accomplished in several methods if the investor is buying under market value. Seller finance then use a conventional lender to do a rate/term refi should they meet the requirements (there's no seasoning period to refi an existing purchase mortgage, so the higher value is used to create the ltv rather than the lower sales price). Same thing but use hard/private money rather than
seller financing. Some local private lenders may be cheaper than the
national sources. In the first option I address using
commercial/business loans. This applies to purchases as well but
most of these sources will want their ltvs at 75-80%. Once the
borrower has established relationships with the lenders they will
start looking at these deals with less risk and can fund based upon
the higher value instead of the purchase price. Cross
collateralization is a great way to get investors into properties with
less money of their pocket too.
3. Portfolio lenders are similar to commercial lenders and may even
offer 30yr loans. However, rates and cost may be higher than
traditional loans.
4. Owner financing was mentioned previously but I wanted to point
out a program that helps buyers and sells come together for those
tough to get done transactions. With this program sellers can sell
at almost full retail while still working with borrowers having less
than desirable qualifying criteria.
Previous to the subprime market opening several years ago, note
buyers had a large market for helping finance deals that most banks
couldn't get done. Their business slowed though over the years
because of the hot subprime market. Since this market, along with
even some "golden investor" markets have disappeared note buyers are
back and looking to help structure deals.
The basic concept is that a seller would sell a property for full
retail and offer owner financing. The key buyers for this type of
financing would be "golden investors" or non traditional home
buyers. When a seller has found a prospective buyer they introduce
the buyer to the note buying investor (actual financing source). The
note buying investor will have qualifications for the buyer but with
lower standards that banks just aren't touching right now. If the
note buyer is satisfied with the buyer's qualifications then the deal
moves on.
At closing, the buyers puts down 5-10% and then sign a note with the
seller for the remaining funds. The seller doesnt get stuck with
this note though; so they wont have to service the note and collect
payments for years out. The note is actually sold at closing to the
note buying investor who has already reviewed the buyer's info.
Keep in mind though that the note buyer is not going to pay full
value for the note. There would be no benefit in that for them. So
they will discount the purchase of the note by 10-15%. So if the
note was for $100,000 the note buyer would pay $85,000-$90,000. The
seller gets those funds at closing along with the initial down
payment that the buyer brought in.
Full retail with about 10-15% off the structured note could have much
better results for all parties seeing that the alternatives could be
longer listings and/or no deal at all.
5. For those investors wholesaling I suggest to use a "1 day" closing loan. These are for doubling closings where the state or title company doesnt allow dry closings. Wholesalers can receive 100% of the purchase price and closing costs. There's no application, no verifications, no credit check, no appraisal. The end buyer's finacing must be lined up and all parties must close at the same title company.
Ben Carmona
Last edited by Investment Loans; 10-15-2008 at 11:20 AM..
Reason: removed contact info
If you wanted to get a 30yr fixed conventional loan then yes you would need to wait 6 months.
However, if you didnt want to wait you may be able to qualify for a commercial/business loan. These are usually 20yr amortizations with a 3-5yr balloon.
is it possible that one canNOT qualify for an investment loan with a particular lender yet CAN qualify with another?
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no seasoning for commercial loans
